Twelve years ago, when the Airbnb co-founders were out of money, living on cereal and struggling to buy milk, they were thrown a lifeline by Michael Seibel, partner and CEO of the Silicon Valley-based seed accelerator Y Combinator.
Online vacation-rental platform Airbnb went public on Thursday despite the pandemic, opening for trading at $146 a share with a $101.6-billion valuation. That’s more than the combined market caps for three of Airbnb’s rivals in the hotel chain industry — Marriott, Hilton and Hyatt.
The startup is credited with revolutionizing the lodging industry, changing the playing field for landlords and putting pressure on hotel brands. And it did all this without ever turning a profit — at least not during the “before times” of pre-pandemic travel or since.
In November 2008, Brian Chesky and Joe Gebbia had dinner with Seibel, then CEO of Justin.tv. He’d been their sole advisor since they first connected at South by Southwest earlier that year, Wired reported. Seibel suggested that they apply to Y Combinator. Chesky argued that YC was for prelaunch companies and AirBed & Breakfast had already launched.
Seibel provided a reality check. “You guys are dying. Do Y Combinator,” he told them. The application deadline had passed, but Seibel got a message to YC founder Paul Graham, who said he’d consider them if they applied by midnight, according to Wired.
Graham recently resurrected that message and shared it on Twitter. In it, he gave some advice to the Airbnb founders on how to make the batch. “They literally have to do it tonight because we are deciding tomorrow,” Graham wrote. “Tell them to be concise and to explain how they’ll make money; the former is always rare and the latter we’re looking more closely at these days.”
The Airbnb founders were accepted into Y Combinator’s winter 2009 batch and got the $20,000 in seed funding that came with admission in those days in return for a 6 percent stake in their company.
Fast forward to 2020. Twice a year, YC invests $125,000 in “a large number of startups,” working with the chosen companies for three months to help them refine their pitch to investors. Each cycle culminates in Demo Day, when the startups pitch to investors.
Fast Company described Y Combinator as “the world’s most powerful start-up incubator.” Fortune called it “a spawning ground for emerging tech giants.”
Airbnb is the most high-profile YC alum and one of just a handful to go public, Crunchbase News reported. DoorDash went public this week and Momentus, a space transportation company, is set to go public via a SPAC. Airbnb raised at least $6.4 billion from investors including Andreessen Horowitz, Sequoia Capital and General Atlantic.
Seibel joined YC as its first African-American partner in October 2014. Previously, he co-founded Justin.tv and served as its CEO. In 2014 Justin.tv became Twitch Interactive and sold to Amazon for $970 million. Seibel also co-founded Socialcam, which participated in YC in 2012, raising angel financing from a group of investors. Socialcam sold to Autodesk Inc. for $60 million.
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In June 2020, Seibel was named to the Redditt Board of Directors after Alexis Ohanian, co-founder of the social media site, resigned and called for his seat to be filled by a Black person. Redditt got its start at YC in 2005.
A Redditt user checked out Seibel online and responded, “Lol read his bio, he was born to a Jewish family in New York City and went to Yale, and is a ceo of another company. So reddit hired a Jewish ceo from New York to be on their board of directors, groundbreaking.”
Seibel talks extensively about startups and how to make the YC batch. During a video interview, he talked about the No. one thing he looks for in a startup pitch: “Your ability to clearly say what you do makes you stand out against literally 50 percent of people,” Seibel said. “It’s this cliche that’s totally correct. If you can’t explain to your mom what you do in two sentences then you probably need to rethink those two sentences.”
In a YC blog this week, YC co-founder Graham wrote about the Airbnb IPO and his personal impressions leading up to. “No one ever worked harder during YC than the Airbnbs did,” he said, referring to the three co-founders. “When you talked to the Airbnbs, they took notes. If you suggested an idea to them in office hours, the next time you talked to them they’d not only have implemented it, but also implemented two new ideas they had in the process. They probably have the best attitude of any startup we’ve funded.”
The Airbnb founders still keep close ties to their YC roots and they’re still close to Seibel, YC President Geoff Ralston said in an interview with Crunchbase News.